The governments of many countries have put sustainability on the agenda for managers of corporations. Indonesia is one example where recent legislation has attempted to change the behaviour of managers. For example, articles 1 and 74 in the revised Companies Act states that a company having its business activities in the field of and/or related to natural resources is obliged to undertake activities to reinforce social and environmental responsibility while participating in sustainable economic development. The activities need to be planned to improve the quality of life of local residents and be environmentally beneficial to both the company and the community. In addition, government sanctions apply to those companies that do not comply with the regulation.

In 2012, the Indonesian government issued GR No. 47/2012, requiring all companies whose operations affect environmental sustainability to engage in corporate social responsibility (CSR) activities. Companies were allowed to set their own CSR budget through decisions undertaken at their annual general meeting, but non‐complying firms were subject to legal sanction. In fact corporations in Indonesia have funded philanthropic, community development and environmental activities for a long time through charitable foundations (the Indonesian term is yayasan).

Despite the best intentions of governments and some companies, some managers deliberately ignore sustainable business practices in order to maximise their short‐term business gains. Each year a number of firms in Indonesia orchestrate illegal slash and burn practices to clear land of unwanted vegetation and peat. Clearing land by burning is cheap, it helps avoid the costly requirement of reforestation for owners who ‘officially’ clear their land and it helps to clear plantations of unproductive palm oil trees. In 2015, however, the consequences of these actions were catastrophic. The fires caused a thick pall of deadly smoke to descend on areas of Indonesia and neighbouring countries. The South‐East Asian haze of air pollution during the extra dry conditions of El Niño caused widespread health and visibility problems that led to businesses, schools, transportation and events closing in Indonesia and her neighbours.

Although at least seven Indonesian company executives were arrested in connection with the fires in 2015, the slow and weak enforcement of laws had little effect on management practices that contribute to this annual environmental disaster. The problems had persisted for at least 18 years to 2015 but very few companies have been prosecuted. It appears, therefore, that new laws, sustainability reporting and even international outrage have not stemmed a regular environmental disaster. The profits of the palm oil industry of Indonesia apparently take precedence over a clear environmental disaster.

QUESTION

Why do you think that legislation has not stopped the annual slash and burn practices in Indonesia? What more needs to be done to stop this environmental disaster unfolding every year?